According to the Welsh Government, the three-year spending review settlement it was awarded last October is now worth at least £600m less than it was at the time, thanks to inflation.
This creates huge additional pressures on public services.
And with public sector workers expecting higher pay rises to compensate them for the erosion of their purchasing power by inflation, finding extra resources is not easy.
Despite having the notional ability to vary income tax – a power the Welsh Government has chosen not to exercise – all but a small proportion of the devolved administration’s revenue comes from the UK Treasury.
This casts Finance Minister Rebecca Evans, like her counterparts in Scotland and Northern Ireland, in the role of a supplicant.
Last month Ms Evans, Scottish Finance Minister Kate Forbes and Northern Ireland Finance Minister Conor Murphy set out their case in a letter to Chancellor Nadhim Zahawi.
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After calling for targeted support to those most adversely impacted by the cost of living crisis, rather than reducing broad-based taxes, and “sensible pay uplifts” for public sector workers, they stated: “Due to inflationary pressures, our budgets for the next three years are now worth considerably less than when we formulated our spending plans last year.
“In addition to the public pay bill and the rising public energy costs, there are other significant emerging pressures for our services, including education and enabling NHS recovery and reform. Our budgets should be uplifted in line with these pressures.
“The NHS turns 75 next year and this presents a much-needed opportunity to boost funding for the service which so many of us rely on.”
Explaining the preposition further, a Welsh Government spokeswoman said: “The UK Government’s financial settlement for Wales falls far short of what is required.
“We continue to press them to pass on the full funding necessary for fair pay rises for public sector workers. Without this, we face considerable challenges and difficult decisions.
“However, we remain committed to the pay review bodies’ processes and to working in social partnership with unions and employers to deliver the best possible outcome within the current funding we have available to us.”
So far, Mr Zahawi has not responded to the Welsh Government.
But it would be a brave and probably foolish man or woman who predicted that more money would be forthcoming.
Earlier this week the Scottish Government did get a response – and it was one that was likely to have been expected but not desired.
It was told more money was already being spent per head of population north of the border when compared with England.
A UK Government spokesman said the Scottish Government had received “a record £41bn per year for the next three years” in the highest spending review settlement since devolution.
He added: “As a result, the Scottish Government is receiving around £126 per person for every £100 per person of equivalent UK Government spending in England over the next three years.”
It’s difficult to believe that the Welsh Government’s request for more money will be received more sympathetically than Scotland’s, although it’s fair to say Wales, despite greater social need, does less well than Scotland from the Barnett formula, which determines how much money is allocated from the UK Treasury to the devolved nations.
Throughout the period when he was chancellor and prime minister, Labour’s Gordon Brown refused to revise the formula so it was based entirely on social need because Scotland would lose out badly.
He thought scrapping the Barnett formula would play into the hands of Scottish nationalists, giving them a greater sense of grievance than they already had. But his stance didn’t halt the rise of the SNP.
Faced with the likelihood that the UK Government won’t stump up the cash needed to give public sector workers what they would see as “sensible pay uplifts”, the Welsh Government has some extremely difficult decisions to make.
Will ministers try to get unions and their members to exercise pay restraint, thus putting at risk the social partnership model they have championed under which government, unions and employers work together in harmony to secure better outcomes for all parties?
Or will they squeeze core budgets to provide as big a pay rise as they can, possibly imperilling the continuation of programmes and projects that may not survive if their funding is cut?
The future is all the more uncertain because of the outlandish nature of the Conservative leadership contest.
Liz Truss may have U-turned on the question of regional pay for civil servants and conceivably other public sector workers, but the fact she was prepared to put it into the public domain as an option is hardly reassuring.
Likewise, Rishi Sunak’s conversion to the cause of radical tax cuts as a means of bolstering his dwindling chance of victory raises concerns for the future of any service dependent on public funding.
As another commentator has suggested, the ideas coming from Ms Truss and Mr Sunak seem to rely heavily on the output of right-wing think tanks.
Previously their reports might have had a headline for a day and then been forgotten.
But now, coming out with ideas that not long ago would have been dismissed as the stream of consciousness of cranks on the fringes of politics, is seen as the mark of an original thinker – at least so far as those who can vote in the Tory leadership contest are concerned.
Some will seek to comfort themselves with the thought that there is a huge gap between Conservative Party members and the electorate as a whole. But whichever of the two remaining candidates is elected will be beholden to those who voted for them, and expected to deliver the programme they outlined at hustings meetings.
It’s easy to shake our heads in disbelief at some of the proposals being aired. But with a very different manifesto to deliver in the real world, it’s unlikely that Ms Evans finds any of this amusing.
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